Published: Thu, August 02, 2018
Markets | By Otis Pena

Oil prices drop as OPEC production increases in July

Oil prices drop as OPEC production increases in July

September Brent crude futures fell 46 cents, or 0.6 percent, to $74.51 a barrel by 0356 GMT after rising almost 1 percent on Monday. It has rebounded to above $70 a barrel since April as the Opec cartel, which pumps a third of the world's crude, cut supplies to bring the market back into balance.

Meanwhile, Brent oil futures for October were up $0.69 or 0.91% at $75.45 a barrel.

Russian energy minister Alexander Novak said on Friday the market remained volatile and responded to verbal interventions, adding that the market had priced in risks related to USA sanctions against Iran.

US West Texas Intermediate (WTI) crude futures were up 22 cents, or 0.3 per cent, at $68.91 a barrel by 0058 GMT.

Brent lost more than 6 percent in July, while US crude futures slumped about 7 percent, the biggest monthly decline for both benchmarks since July 2016.

Shrugging off concerns about global trade tensions, BP CEO Bob Dudley said in a conference on second quarter earnings that crude oil prices would be supported by supply disruptions from OPEC members Iran, Libya and Venezuela, but his outlook for the price of oil was lower than current market levels.

A survey of 44 economists and analysts forecast Brent crude to average $72.87 a barrel in 2018, 29 cents higher than the $72.58 projected in the previous month's poll and above the $71.68 average so far this year. Trade tensions between the United States and its economic partners are also weighing down on prices due to the potential impact on economic growth and energy demand.

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Saudi Arabia announced last week that it would suspend shipments of oil through the critical Bab el-Mandeb Strait, after Houthi rebels in Yemen attacked a pair of oil tankers in the Red Sea.

Weighing on prices was a report by the American Petroleum Institute (API) that showed domestic crude inventories rose by 5.6 million barrels last week.

Oil prices rebounded from levels reached over the past two weeks as U.S. sanctions threatened against Iran began to cut exports from Tehran.

Oil prices jumped Monday as markets weighed OPEC production hitting its highest level this year against a war of words between the U.S. and Iran. "I don't think markets are expecting that to get any better anytime soon".

Rapidly escalating tensions between Iran and the United States last week have stoked existing supply concerns among key producers like Venezuela and Libya.

"The best case scenario is that the USA provides meaningful sanction waivers in the run-up to the mid-term elections and Iran can get away with a loss of around 500-700,000 barrels per day of exports. Even though trade war worries were eased between the USA and European Union this week, they still loom large with China, weighing on prices".

The initial deal, under which OPEC and non-OPEC producers are cutting supply by about 1.8 million barrels per day, had expired in March 2018.

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